The UK government’s announcement of a renewables price cap remains short on detail. Drax remains a key strategic element in the GB power system and should have a strong bargaining case. We continue to see the potential switch from the Renewables Obligation to the greater price certainty of a Contract for Difference as a possible win-win outcome but the introduction of the cap suggests that strike price negotiations with the wider industry have proved difficult. The recognition of the need for dispatchable generation perhaps puts Drax in a stronger position. Its non-RO assets, particularly the Cruachan pumped hydro scheme can continue to benefit from what is likely to remain a volatile GB power market.

12 Oct 2022
Drax Group - Ro Price Cap But Cfd Option Remains

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Drax Group - Ro Price Cap But Cfd Option Remains
Drax Group plc (DRX:LON) | 682 -40.9 (-0.9%) | Mkt Cap: 2,385m
- Published:
12 Oct 2022 -
Author:
Adam Forsyth -
Pages:
6 -
The UK government’s announcement of a renewables price cap remains short on detail. Drax remains a key strategic element in the GB power system and should have a strong bargaining case. We continue to see the potential switch from the Renewables Obligation to the greater price certainty of a Contract for Difference as a possible win-win outcome but the introduction of the cap suggests that strike price negotiations with the wider industry have proved difficult. The recognition of the need for dispatchable generation perhaps puts Drax in a stronger position. Its non-RO assets, particularly the Cruachan pumped hydro scheme can continue to benefit from what is likely to remain a volatile GB power market.